ZRBA – A Special Situation for the Small Time Investor
Posted on | August 18, 2009 | No Comments
A special situation was raised on Stock Pursuit, who in turn got the tip from Stock Bee. This is the kind of trade that really only makes sense for a small time investor. Zareba Systems (ZRBA) announced a reverse stock split of 250 to 1. This means that the company wants to combine 250 shares of their common stock into one new share. The reason this is interesting is that the company has said that it will pay $5.20 cash for up to 249 shares. You buy 249 shares of Zareba Systems and hold the stock until you cashed out. The price of ZRBA closed at $3.80 which is the same price I paid for it on Monday. If have more than 249 shares you can’t get cash. This is a trade that costs under a $1000 including fees and could result in a profit of 30%.
There are of course risks. The company could decide that only shareholders from a previous date can qualify. They could of course drop the deal if it becomes to expensive for them. I think this is unlikely given they are doing this as part of delisting their stock from NASDAQ.
Disclaimer: I own 249 shares of ZRBA. Because I make a trade is not a good reason for you too. I am not advocating that other persons do what I have done, just demonstrating my investing style for educational purposes. Before you engage in any investment make sure you understand all the risks associated with it. You could suffer permanent loss of capital. Don’t trust someone because you like the way their website looks.
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